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To Everything (Even Fiscal Policy) There Is a Time: A Time to Restrain and a Time to Spend

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Using a fiscal model developed at the Caledon Institute, this report explores the impact of two archetypical scenarios on the federal debt between now and fiscal year 2008-09. The first scenario is Caledon’s best guess as to the modest spending increases and tax cuts expected in the 1999 federal Budget. Spending goes up by $3 billion and taxes down by $2 billion in 1999-2000. The other scenario assumes larger spending increases and tax reductions. Spending increases by $9 billion and taxes decrease by $3 billion in 1999-2000.

With either modest or generous spending increases and tax cuts, the federal debt burden will decline steadily and substantially over the next ten years. Even if the federal government spent more and reduced taxes more, the debt would continue on its downward trajectory. The study concludes that Ottawa need not continue indefinitely the tough fiscal policy that vanquished the deficit. Canada’s poor and vulnerable have been hardest hit by spending cuts and tax increases: They should be first in line for redress.

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